IASB issues ‘fair value’ guidance

The International Accounting Standards Board has published draft guidance on
one of the most controversial issues in financial reporting – ‘fair value’
accounting rules.

The proposals incorporate recent guidance on fair value measurement published
by the US Financial Accounting Standards Board and are consistent with a report
of the IASB’s Expert Advisory Panel published in October 2008 on fair value
measurement in illiquid markets.

Fair value rules, also known as ‘mark to market’, requires banks to value
financial assets at current market rates. Critics have blamed fair value for
exacerbating the multi-billion losses in the banking industry, while the rules
have been watered down in the US.

Sir David Tweedie, Chairman of the IASB, said: ‘This exposure draft is an
important milestone in our response to the global financial crisis. It proposes
clear and consistent guidance for the measurement of fair value and also
addresses valuation issues arising in markets that have become inactive.’

Further reading:

draft guidance

Related reading

Fiona Westwood of Smith and Williamson.